Breakingviews - Pompeo's Chinese web wall is a tall order



HONG KONG/SAN FRANCISCO (Reuters Breakingviews) - Washington’s Chinese firewall is a tall order. U.S. Secretary of State Mike Pompeo wants to purge America’s internet of Chinese telecoms, apps, cloud services and more. In effect he is trying to put an information ring-fence around the People’s Republic, and wants other countries to join in.

The so-called Clean Network programme originated as part of the White House campaign against telecoms equipment maker Huawei. Pompeo's announcement on Wednesday vastly widens its scope. Service providers like China Mobile are to be denied access to American networks, which could prevent the carrier’s mainland customers from roaming in the United States. Suspicious Chinese apps are to be purged from Google Play and iTunes, nor can U.S. offerings from the likes of Facebook feature on Huawei's app store.

American executives are also to stop storing sensitive data on cloud servers run by Chinese companies like Tencent or Alibaba. That's going to be an expensive headache for U.S. firms operating in China. What’s more, the United States proposes to prevent Chinese intelligence agencies from “compromising” the undersea cables that connect data centres around the world. The White House is brandishing a certain infrastructure advantage here: all the 20 or so submarine pipes transmitting data from Asia across the Pacific terminate on the U.S. west coast.

This initiative does not propose to stop already installed Chinese apps like Tencent's WeChat from working inside the country, as India has done. That might come via other channels, however. And it’s unclear how the new restrictions would be implemented technologically and enforced legally; the State Department doesn't have the power to force Google to evict Chinese apps, for example.

What is certain is retaliation from Beijing. Visiting American executives could find their mobile SIM cards don't roam in China. And barriers to data sharing will make it harder for companies to integrate local and foreign operations. That puts cumulative bilateral direct investments the Rhodium Group estimates at over $400 billion at risk. And the world's most unstable commercial relationship will have taken another giant step backward.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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